HOW TO START AND RUN A MOBILE VALUE ADDED SERVICE (VAS) IN NIGERIA
Version: 1.0
Date: January, 2017
Prepared By: Femi Alla Kuiper Systems LTD Email:
[email protected] Mobile: +234 8062756262, +234 8097096700
TABLE OF CONTENT 1.
INTRODUCTION
3
2.
MARKET ANALYSIS
3
3.
CURRENT INDUSTRY PRACTICES
4.
HOW TO APPLY FOR A VAS LICENSE
6
5.
THE REQUIRED TECHNOLOGY SETUP
7
Appendix/Sources
4-5
8
Market research sources
8
Receipt from NCC
9
Receipt from NCC
10
Letter from NCC
11
Other supporting documents (Dropbox folder)
12
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Example feasibility study submitted for license application
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MTN invoice for bulk SMS service charge
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Sample VAS software application with flow diagrams
INTRODUCTION A mobile Value Added Service (VAS) is a telecommunications industry term that refers to non-core telecommunications services, that is, all services apart from standard voice calls. Generally, value-added services (VAS) add value to the standard service offering, prompting subscribers to use their phone more and allowing the mobile operator to drive up their average revenue per user or ARPU. Some examples of VAS services could include the following: SMS-based news subscription services from the mobile network, or mobile games offered by mobile network operators. As the mobile market matures in Nigeria, new regulations are being introduced to further regulate the market. This report is drawn from my experience of designing similar applications in the past and also the experience gained by leading a group that had mobile value added services running the largest mobile network in Nigeria and the experience of having to apply for Mobile Value Added Services license from the Nigeria Communications Commission (NCC) when they introduced a new requirement for such in 2013. This new requirement required all organizations with services running on the mobile networks to have a VAS license to continue doing so.
MARKET ANALYSIS According to the Nigeria Communications Communications Commission, Nigeria is estimated to have reached 109% mobile phone penetration, with 153 million mobile phone subscribers. Since many Nigerians own more than one SIM card, the actual number of unique subscribers is lower. The Nigerian Communications Commission currently puts the number of internet users in Nigeria at about 92.5 million with most internet users connecting to the internet internet via their Smartphones. Smartphones. However, smartphone smartphone penetration penetration is put by a number nu mber of informed estimates at 12% and 30% with a high percentage of the smartphone users concentrated in the Lagos area. These show that SMS still remains an effective way to grant access to a service to a large segment of the Nigerian mobile phone user.
CURRENT INDUSTRY PRACTICES
If a company approached one of the mobile networks in Nigeria with a proposal to run a VAS service with the mobile network, in compliance with NCC regulations, the mobile network will most likely advise the company to do one of the following: I. II.
Partner with one of the existing licensed mobile VAS operators, which currently runs VAS services on their network. Produce a valid VAS license issued by the NCC.
Usually, when running a VAS service with a mobile operator, there would be a revenue share between the provider of the VAS service and the mobile operator. The revenue share model varies between networks. For example, for a particular mobile network, 60% of the revenues from a VAS service could go to the mobile operator, while 40% goes to the VAS service provider. In negotiating a partnership with an existing licensed VAS operator, the company proposing to run the VAS service in partnership with the licensed VAS company would have to make the partnership financially worthwhile for the licensed VAS operator. This usually means that the licensed VAS operator would take a part of the revenues being generated by the new VAS service. About 25% cut for the licensed VAS operator from the revenues accruable to the company from the VAS service could be considered a fair arrangement.
The difference between shared and dedicated short codes
Another point to note is the difference between a shared short code and a dedicated short code. The use of shared short codes is more common with VAS providers. This could become important if the company providing the VAS service opts to partner with an existing licensed VAS company to launch an SMS based VAS service. The licensed VAS company could use an existing short code which may currently be running other services to run the proposed new VAS service. The various services that run on the short code would be differentiated by keywords. For example, users of a football focused VAS service may have to start their messages with football for example. This will allow their platform recognize the incoming messages to that
short code which begin with football as intended for this new football-based VAS service. The same short code could be running a chat service for example, and users of that service would be advised to start the text messages they are sending to the same short code with “chat “chat”” as the keyword to differentiate the text messages that come in for the chat service. When the company which wants to launch a VAS service in Nigeria eventually obtains its license and is in negotiations with the mobile networks for a short code, there is a good chance that different networks will issue different short codes for the same service. It will take some further negotiations with the various networks to get them to all issue the same short code for the service.
SMS broadcast by the mobile network .
It would be essential the company providing the VAS service in their negotiations with the partnering mobile network to get the network to advertise the VAS service to their subscribers. In these types of arrangements, the cost of this SMS broadcast is usually taken out by the mobile network before the revenue share with the partnering company is calculated and paid out by the mobile network to the partnering company. One of such invoices invoices from a mobile network has been been included included with the supporting documents in this report. Note that NCC also offers short codes and short codes can be obtained from the NCC NCC upon request.
HOW TO APPLY FOR A MOBILE VAS LICENSE The class of license that most VAS services would fall into and have to apply for will be Value Added Services license, under the category: Content Services using Short Code. The NCC office office is located in Abuja but there there is also a liaison office office located in Lagos where application forms can be obtained and submitted. There is an initial application fee of 26,000 Naira to obtain the forms (see NCC receipts in the Appendix section and also among the supporting documents). documents). When submitting the application form, the following will be required:
500, 000 Naira application fee.
Tax Clearance Certificate
A feasibility report on the proposed VAS service
A contract with an existing mobile network
A newly registered company would not have issues with obtaining a tax clearance if the time of registration of the company still falls within the time frame in which newly registered companies are exempted from paying taxes in Nigeria. The usual roadblock for companies seeking a VAS license is the requirement for the submission of a contract between the company and a mobile network operator along with the VAS license application. The mobile network operator will generally require that the company possesses a valid VAS license before signing a contract with them if they are interested in the VAS product. The usual practice is to apply for the license with the help and guidance of someone who works at the NCC.
THE REQUIRED TECHNOLOGY SET-UP (For an SMS based VAS service) This example provided would be for an SMS based VAS service, which is the most prevalent kind of VAS service in Nigeria. The VAS service provider would not be receiving text messages directly from the general public but the text messages will be received by the mobile network(s) on the VAS service provider’s behalf, Therefore the burden of provision of the physical infrastructure to handle the SMS traffic will be borne by the mobile network’s existing infrastructure designed to handle such traffic. Users of SMS based VAS services are usually advised to send an SMS to subscribe to the service. This SMS would be sent to an advertised short code or a 5 digit number. These types of 5 digit numbers are known in the telecom industry as short codes. The mobile network will likely provide the VAS service provider with a URL or IP address from where they will forward all text messages which the short code receives to VAS service provider. The VAS service provider will be advised to configure its servers or web application to receive the messages from this location (URL or IP address). The VAS provider’s provider’s web application will then take these forwarded messages, process them and send back appropriate responses to the same URL or IP address for onward forwarding to the original sender of the message. The messages to be forwarded to the VAS service provider by the mobile network are likely to come in the following format: Variable
Value
Msisdn
Mobile number from the incoming SMS.
Text
The message part of the SMS.
Det
Message details and timestamp. timestamp.
APPENDIX / SOURCES Market research sources 33% of mobile subscribers in Nigeria dispersed across only 5 states, FCT https://techpoint.ng/2016/06/01/mobile-subscribers-nigeria-q1-2016/
Nigerian Communications Commission, Industry statistics statistics http://ncc.gov.ng/stakeholder/statistics-reports/industry-overview#view-graphs-tables-5
Lagos state has most active phones, internet users in Nigeria http://technologytimes.ng/surveylagos-tops-number-of-internet-users-and-active-voicesubscribers-in-nigeria/
Number of smartphones users in Nigeria from 2014 to 2019 https://www.statista.com/statistics/467187/forecast-of-smartphone-users-in-nigeria/
Smartphone penetration hits 30% in Nigeria http://guardian.ng/business-services/smartphone-penetration-hits-30-in-nigeria/
OTHER SUPPORTING DOCUMENTS Some supporting documents have been placed in two accompanying Dropbox folder. The URL to this folder is: https://goo.gl/C3Rt3o
Sample VAS software application with flow diagrams and
VAS application sample documents
The folders contain copies of the letters and receipts already provided as part of this document. They also contain -
Example feasibility study submitted for license application
-
Invoice from mobile network for bulk SMS service charge
-
Sample VAS software application with flow diagrams
